Laws introducing a 90-day trial period for newly hired employees have had little impact on the labour market, finds new research.
An economic analysis of employee and hiring data from Motu Economic and Public Policy Research Trust has shown that the policy has led to little change in employment rates or employee mobility.
The trial period was introduced for small firms in 2009, and extended to all businesses in 2011. The legislation was intended to decrease the risk involved in hiring new people, and so increase firm hiring, particularly of disadvantaged jobseekers.
The Motu research drew on Statistics New Zealand’s Integrated Data Infrastructure, using data on every firm and every person in New Zealand to test how the policy affected firm hiring behaviour.
“My research shows that the 90-day trial period isn’t helping people get jobs,” said author Isabelle Sin, Fellow at Motu. “However, it also doesn’t make people less likely to leave secure jobs and doesn’t make employment relationships less stable. Overall, my research suggests the 90-day trial policy isn’t doing much at all.”
Read more about the research on Scimex.org.
The SMC gathered the following reaction from New Zealand experts. The comments are abridged, full comments are available on Scimex.org.
Dr William Cochrane, Lecturer, School of Social Sciences, University of Waikato, comments:
“This solid piece of research comes as no surprise to me as I have always doubted that either the 90-day trial period or the starting out wage would have any significant impact on the labour market. Both seemed more about placating a particular constituency and compensating for poor human resource practice than improving the likelihood that people with poor labour market characteristics would gain employment. While employers may be happy with the extra power they gain from such provisions the need to hire arises from the demand for an employer’s goods or services while the person hired is chosen for their superior labour market attributes. Neither of these being amenable to influence by a small increase in employer power or decrease in the minimum amount payable”.
Dr Bill Rosenberg, Economist and Director of Policy at the Council of Trade Unions, comments:
“This is a carefully constructed and thorough investigation which will be of interest internationally. Its finding of zero effect on employment of 90-day trials, and particularly for vulnerable people seeking work, is of importance in policy terms and should lead the Government to review its policy. The justification given for its introduction was in terms of increasing employment for vulnerable people but the evidence is that this law has clearly failed to do this.
“The authors and Treasury are to be commended for this research. It contributes significantly to evidence-based public policy and our knowledge of New Zealand employment relations.”